Macquarie Bank and ANZ together accounted for more than half of the system-wide growth in the Australian mortgage market in October as most regional banks and mutual lenders watched their loan books shrink.
Data published by the Australian Prudential Regulation Authority on Thursday show that the value of home loans sitting on the balance sheets of regulated lenders rose by A$7.8 billion in October to $2.14 trillion.
Macquarie, which has been the fastest growing home lender over the last four years, expanded the size of its book by $3.3 billion to more than $112 billion.
That accounted for around for around 40 per cent of the mortgage sector’s growth over the month.
ANZ’s aggressive pricing strategy – backed also by the retention of cashbacks for new borrowers – grew its home loan book by $2 billion to almost $288 billion.
Two other major banks – Westpac and NAB – also registered market share gains in September after expanding their books by $1.6 billion and $1.3 billion respectively.
However, the country’s largest home lender, Commonwealth Bank, continued to lose market ground even though it eked out marginal growth among investment borrowers.
CBA’s total mortgage book grew by only $63 million over the 30 day period.
As lending growth this year has concentrated among a few big lenders, regional banks and mutuals have stepped away from cut-throat pricing to avoid being saddled with unprofitable loans.
Bendigo, AMP Bank and Bank of Queensland were among the many lenders to cede market share in September.
Bendigo’s mortgage business contracted by more than $200 million, while BOQ suffered a $60 million decline in the size of its book.
AMP Bank’s mortgage business dwindled by more than $50 million.
Mortgage activity contracted across much of the customer-owned sector, although a string of providers were able to winkle modest growth including Great Southern Bank (up $33 million) and Defence Bank (up $36 million).
Newcastle Greater Mutual and Heritage-People’s Choice were among the mutuals to lose market share after reporting their books had suffered run-off of $20 million and $3 million, respectively.
Canstar director Steve Mickenbecker said the ability of mid-market lenders to compete was now constrained by the fact they were partly reliant on wholesale funding to support their mortgage businesses.
“When rate cycles turn the pain is felt most among the mid-sized lenders who fund part of their lending through wholesale funds,” he said.
“Those types of banks typically have much lower credit ratings than the major banks so they have to pay more for wholesale funding.”
Mickenbecker said there was an increasing number of lenders no longer offering discounted pricing to prospective house buyers because of the impact of higher funding costs on their margins.